What is transferable LC?
A Transferable Letter of Credit (LC) is a documentary credit under which the Beneficiary (first Beneficiary) may request the bank specifically authorised in the credit to transfer the credit, available in whole or part, to one or more secondary Beneficiary(ies).
How a transferred LC is different from the transferable LC?
For an LC to be transferable, the LC must specifically state it to be transferable. A transferred LC cannot be transferred at the request of a second beneficiary to any subsequent beneficiary.
What are the main characteristics of transferable LC?
In a transferable letter of credit, the bank will include provisions for transferring the extension of credit—all or part of the credit for which the buyer was approved—to a secondary beneficiary. The secondary beneficiary receives rights to the payment if a loan is needed at the time of payment.
How many times a transferable LC can be transferred?
Can the transferred Letter of Credit be further transferred again? No, it can only be transferred to one or more second beneficiary, but cannot be further transferred.
How is LC transferred?
Your buyer issues a transferable LC via his bank (LC issuing Bank). You submit an application to CB Bank to transfer the LC (complete or partial) to your seller. CB Bank transfers the LC to your seller. Seller ships out goods and submits trade documents to his bank.
What is the difference between a Transferable LC and back to back LC?
Difference between Back to Back LC and Transferable LC Only then can the beneficiary transfer the credit to a third party. There is only one LC involved in this process. In the case of a back to back LC, the LC is issued by the bank against the primary LC, which acts as collateral.
Why are LC not transferable?
For financial security and convenience, the letter of credit remains untransferable other than the beneficiary. By default, a non-transferable LC is irrevocable too. Hence the beneficiary cannot make any alterations or assign the approved credit to other parties.
Is irrevocable LC transferable?
An irrevocable letter of credit cannot be canceled, nor in any way modified, except with the explicit agreement of all parties involved: the buyer, the seller, and the issuing bank. For example, the issuing bank does not have the authority by itself to change any of the terms of an ILOC once it is issued.
What is difference between revocable and irrevocable LC?
Irrevocable letters of credit are more common than revocable ones. These stipulate that no amendments or cancellations can occur without the consent of all parties involved. Irrevocable letters of credit can either be confirmed or unconfirmed.
Can back to back LC transferable?
The issuing bank has to designate such an LC as transferable at the time of issuing it. Only then can the beneficiary transfer the credit to a third party. There is only one LC involved in this process. In the case of a back to back LC, the LC is issued by the bank against the primary LC, which acts as collateral.
What are different types of LC?
Main types of LC
- Irrevocable LC. This LC cannot be cancelled or modified without consent of the beneficiary (Seller).
- Revocable LC.
- Stand-by LC.
- Confirmed LC.
- Unconfirmed LC.
- Transferable LC.
- Back-to-Back LC.
- Payment at Sight LC.
Can a letter of credit be revocable under UCP 600?
As per Article-3 of UCP 600, a credit is irrevocable even if there is no indication to that effect. Further UCP 600 does not provide for revocable LCs and therefore such credits no longer exist. An Irrevocable Letter of Credit is one which cannot be cancelled or amended without the consent of all parties concerned.
Can SBLC be transferable?
Can SBLC be transferable? An SBLC is transferable in that the beneficiary can sell or assign the rights to the proceeds from the SBLC, but the beneficiary remains the only party who can demand payment of the SBLC.
Is Transferable LC revocable?
Concept of Transferable Letter of Credit The middlemen are always in shortage of money. So, he requests the final buyer for a Transferable Letter of Credit. If the final buyer finds it valuable to engage in the foreign transaction, he will request his bank to issue an Irrevocable Transferable Letter of Credit.
Are all LC irrevocable?
According to the latest letter of credit rules (UCP 600) all credits are irrevocable. Letter of credit is a conditional payment obligation of the issuing bank and the beneficiary always has to make a complying presentation in order to receive the payment.